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Covered call calculator

Selling a covered call pays you a premium in exchange for agreeing to sell your 100 shares per contract at the strike if the stock is above it at expiry. Enter the trade to see what it pays, how much of a fall it absorbs, and what you give up if the stock runs.

Covered call versus just holding the shares

Profit or loss against today’s share value, at expiry. Above the strike the shares are called away, so the covered call stops gaining; below it, the premium softens the fall.

How the numbers are worked out

• Returns are measured against what your shares are worth today, because that is the money you could have instead. Your own cost per share only changes whether being called away locks in a gain or a loss overall.
• Return if not called = premium received ÷ value of the shares today.
• Return if called away = (premium + (strike − share price) × shares) ÷ value today.
• Downside cushion = premium per share ÷ share price: how far the stock can fall by expiry before you are worse off than today.
• Time value = premium minus intrinsic value. For an in-the-money call, intrinsic value (share price − strike) is not extra income — it is paid for with the shares you give up.

What this calculator leaves out

• Early assignment, which is most likely just before an ex-dividend date when the call is in the money.
• Dividends paid while you hold the shares, and closing or rolling the call before expiry.
• Taxes: being called away is a sale of your shares, with whatever that means where you live.
• The bid/ask spread. Use the bid, or what you actually expect to be filled at.

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